The big variables that will affect your future retirement are how much you spend, how long you live, what happens with inflation and the return you get on your investments, according to Kevin Gahagan, a certified financial planner and principal of Mosaic Financial Partners in San Francisco. Of these, you only have direct control over your spending.

You influence your portfolio returns by how you structure your investments. You also influence how long you live through your behavior – most people aspire to live a long time. None of us individually have any influence over inflation.

Therefore, it’s critical to examine your spending and match your lifestyle with your resources and cash flow, Gahagan says.

Here are some tips for getting on top of your spending habits and making any necessary changes.

Analyze Your Spending

If you don’t know where your money is going, you might be missing opportunities to eliminate waste and improve your financial picture, says certified financial planner Kevin Smith, executive vice president of wealth management for Smith, Mayer & Liddle in York, Pa. Without a budget or a spending plan, you’re in the financial equivalent of the Wild Wild West, where anything goes but people rarely escape unscathed, he says. Carefully analyzing your spending can be a real eye opener.

There’s no time like the present to tackle this task, which will take time if you don’t already analyze your monthly spending. Free online personal finance software like Mint or Personal Capital or paid software like Quicken can simplify your work by aggregating the information about all of your credit cards, bank accounts, brokerage accounts and loans in one place. 6 Best Personal Finance Apps is one place to start.

You can then easily see the big picture – your net worth – as well as the minute details, like what you spent on dinner last night. You can categorize each transaction to see your total spending in areas like groceries, travel, entertainment, healthcare and more. Or you can analyze your spending the old fashioned way by going through your account statements and entering all your transactions into a spreadsheet. It may take longer, especially if you have numerous accounts, but the most important thing is to choose a method you will actually use. (If you aren’t already in the habit of budgeting, get more tips from our Budgeting Basics tutorial).

Smith recommends compiling two to three years of spending history before you retire to gauge trends and develop a baseline. Then, carefully analyze which expenses are likely to increase in retirement and which are likely to decline. “For example, business-related clothing, travel and entertainment expenses may diminish, a mortgage may soon be repaid and disability insurance premiums may no longer be necessary, whereas expenditures for healthcare, vacation travel and leisurely activities like golf or hobbies may go up,” he says. (Read The Financial Benefits of Being Retired.)

What to Cut

If you discover that your projected retirement spending is at a level you won’t be able to sustain, you’ll have to make changes. For some people, the least painful option is to make one huge change, like moving to a less expensive city with a lower cost of living. For others, it’s easier to make lots of small changes that aren’t as noticeable. A combination of the two will really cut your expenses. (See Can You Live a Debt-Free Life? and 5 Ways to Control Emotional Spending.)

Gahagan suggests categorizing your expenses into negotiable and nonnegotiable categories. For example, if you aren’t going to sell your home, property taxes and homeowners insurance are nonnegotiable. (You may be able to lower your premiums, though: See Insurance Tips for Homeowners.) For the negotiable categories, consider wants, priorities and trade-offs. The more significant the shortfall, the greater the challenge, but start by looking for changes you can make to cut your spending by 10%. The classic case is a $4 daily coffee, which totals $1,460 a year – is that a necessary expense?

“The key is to evaluate where you spend and make choices about what spending can be reduced – ideally, without significantly altering your lifestyle,” Gahagan says. You want to spend thoughtfully and be aware of how things add up over time.

Categories to Consider

Here are some concrete ideas for changes you can make to save money.

Housing and Vehicles

Selling your current home and downsizing might eliminate some significant costs, including debt service (the mortgage), property taxes, energy costs, insurance and maintenance, Gahagan says. And if you have a second car, do you really need it? Putting it up for sale eliminates the additional insurance along with maintenance costs.

Selling either of these big-ticket items also gives you extra cash to invest in your retirement portfolio.

And whether you’re downsizing or not, raising the deductible on your property insurance and auto insurance can reduce your premium costs.

High-Interest Debt

Interest costs you money every month, and you get nothing in return – except that you’ve been enjoying the purchases that put you into debt for longer than you could have if you’d waited until you had the cash to pay for them. If you’ve reformed your overspending ways and you have good credit, you might be able to use a 0% APR balance transfer to speed up the payback process and save money on interest. (See Understanding Balance Transfers and 0% Balance Transfers: Who Really Benefits. For other ways to pay off high-interest debt, see Alternatives to Balance Transfers.)


It’s easy to justify any and all purchases in this category. You have to eat, and cooking is cheaper than going to a restaurant. But if you don’t create a grocery budget and stick to it, you can spend hundreds more than you need to every month. You might be surprised to find that small changes can save you big bucks while having little effect on your eating habits.

  • Shop at your local discount grocer at least once a month.
  • Build your weekly shopping list around sale items.
  • Stock up when your favorite items are on sale.
  • Freeze food that might spoil before you can eat it.
  • Limit shopping trips to one per week.
  • Build your weekly meal plan around what you already have in the house, then supplement with a few sale items from the store.
  • Use money-saving coupons and smartphone apps.
  • Cook large-batch recipes with low-cost ingredients.


Once you’re no longer limited to traveling when your employer will give you time off, you can plan your trips at less popular times of year, when accommodations will be less expensive, plane fares will be cheaper and attractions will be less crowded. (See Shoulder Season: Your Ticket to the Perfect Vacation and The Best Times to Take a Vacation.) If you have friends or family who are willing to put you up, planning your vacations around staying with them can save you hundreds on lodging. You’ll also enjoy quality time with the important people in your life – a key to living a long, happy and healthy life.

Senior Discounts

Senior discounts can save you money, but don’t assume that taking the senior discount is the cheapest option. You might save more by using a coupon or a different discount, waiting for a sale, shopping around or stacking savings where it’s allowed (for example, using your senior discount in combination with a sale and a coupon). If you’re booking a hotel room, for example, see if the senior discount really saves you money over using your American Automobile Club (AAA) discount (if you’re an AAA member). If you’re going to the movies, the matinee price might be cheaper than the senior discount price on evening tickets.

In cases where the senior discount is the cheapest option, try to plan your entertainment around taking advantage of it. If your favorite grocery store gives seniors 5% off on Wednesdays, make that your shopping day. If your favorite restaurant offers seniors a discount for dining early but you normally have dinner at 7:00, eat a light lunch so you can enjoy a 5:00 dinner. (Learn more in Senior Discounts So Soon?) Cutting back on dining out will save even more.

The Bottom Line

You can control how often you dine out, your home size, the type of car you drive, the extravagance of the vacations you take, your gifts to grandchildren and charities, and other aspects of your lifestyle, Smith says. “All have major financial implications, and all are completely up to you. Ultimately, we are all a product of our choices. Live well, but choose wisely.” (For related reading, see 10 Signs You Are Not OK to Retire.)